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The Indirect Value of Free Content

After my previous post on free content, I got a lot of response outside of the blog - mostly via twitter direct messages.  I encouraged everyone to post their own thoughts, and Justin Whitaker was kind enough to guest post his thoughts here.

A couple of days ago, Chris posted Straight Talk on the Price of Free Content, a discussion post on the role of free content in publishing.  The problem with such discussion points is that much of the discussion around Free Content tends to get muddied by traditional business thinking.

If you have grown up prior to, well, now, or have and MBA, you expect a direct relationship between what you do and your income.  There is probably a formula for it, which is every bit as iconic as e=mc2, a formula like: W=$ (work=money). You do some work, you get a tangible result, commensurate payment.

With Free Content, that relationship is broken. If I post some Free Content, doesn’t matter what kind it is, the immediate payment is:

  • The opportunity to display my mastery of a subject and a chance to increase my standing in the community I address.
  • A chance to draw attention to or generate traffic for my blog/business/consulting/design gig.

Both of these are intangible payments. It is revenue of a sort, but if you plug that into the common understanding of what happens when we work, we do not expect to be repaid in website traffic, or acknowledgment.

It’s very hard to put food on the table with what amount to personal accolades.

The problem is that consulting types, VCs, and people looking to make a living off the web is that they are looking for revenue in the wrong place: free content is about generating indirect revenue.

For example:

  • I post to a Blog for a year, and get a publishing deal from it.
  • I run a Blog and post a detailed Presentation, and that leads to speaking offers.
  • I post a Podcast, and that generates the traffic that drives my advertising revenue.
  • I post a Webcomic, and that leads to marketing gig.
  • I code some Open Source Software, and sell support for it.

Notice that in all of those examples the initial transaction is free. The author is giving up their time to entertain and educate the reader, listener, or viewer, without asking for direct payment.

There are many people that want to make a claim that this is a brand new world we live in, a new economics…um, no, it isn’t. Sorry. The Free Content business model is nothing new: it is the same model that broadcast television has been using for 50 years.

For a television broadcast, the viewer pays nothing, other than the opportunity cost of watching another show. The cost of the production of that broadcast is shifted, to advertisers, syndication outlets, or purchasers of the inevitable DVD collection.

With Free Content, the consumer of the information pays nothing to the producer; instead income comes from speaking engagements, book sales, or consulting contracts. The payment for the content is decoupled from the consumption of the content, but theoretically the model does not change, just the degree of separation from content to revenue source.

That is why things like Matt Maroon’s Bubble 2.0 post seem off the mark.
In a sense, he is right: you need to ask where the revenue is coming from, and a revenue model that is based on generating revenues directly from Free Content is not sustainable in the long term. Once the money dries up, that’s the end of the show.

I think there is still question that needs to be asked before we automatically write off one of these “Bubble 2.0” companies: how far removed from what we want our audience to do is the revenue stream?

If there is revenue tied indirectly to the content produced, then there is a repeatable, sustainable, revenue model. It may be hard to quantify, and it may be less than if you were getting paid directly, but forecasting revenues from that content is possible. All you need to do is keep producing Free Content.

Where does that leave the venture capitalists, private investors, and fortune seekers that are backing “Bubble 2.0” endeavors?

They need to ask if the Free Content they are producing generates repeatable indirect revenues, and if not, what they can do to align their Free Content with a business model that does.

Preferably, before the seed funding runs out.

  • Matthew Maroon

    I think I was talking about something other than what you are. Free content is great for individuals. I know exactly what you are talking about there, since my poker blog enabled me to write a book that sold incredibly well, and start two very profitable poker sites.

    That’s great for an individual like me, but orders of magnitude away from what a VC backed startup needs to see. Content is a lot different than a web service like Mint or Facebook in that regard I think.

  • http://www.madmortgageworld,com daniel martin

    Great Post! I think this post is a great addition to the global wake up call we have inspired in each other. Web 2.0 is an entrepreneur’s dream come true. We have an opportunity to prove our own capabilities and expertise while building a brand online. Free content says “if he/she does this type of thing for free then how much more is he/she capable of should money be introduced to the equation?”

    keep it up the great content Chris!

  • Web Marketer

    Your assessment of free content is right on. Daniel makes a great point - something I never thought of. Many people expect something for free these days before they’ll buy something, so that’s the new model within which we need to work.

    Something I’ve wondered about… If someone wanted to become an expert on a topic like web site traffic building, he would likely look around on the Web, picking up tidbits here and there. At some point, with enough looking, he’s likely acuired enough knowledge to be an expert. Is it possible that someone could acquire knowledge of substantially all there is to know about traffic building just from surfing free resources on the Web? (Hopefully, he’s able to separate the junk from the good advice over time and not just acquire low-quality knowledge.)

    Thoughts on this?

  • Chris

    Web Marketer,

    “Hopefully, he’s able to separate the junk from the good advice over time and not just acquire low-quality knowledge.”

    That’s really the key, isn’t it? There is a lot of really great content out there, but it’s part of a much larger collection of information.

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